System and method for providing an insurance premium for price protection

ABSTRACT

Systems and methods for providing an insurance premium in association with an insurance strike price for a commodity are disclosed. By paying the insurance premium a consumer may obtain price protection for a commodity purchase. In particular, in one embodiment a consumer may obtain the right to be reimbursed for any amount paid over the insurance strike price for the commodity.

RELATED INFORMATION

This application is a continuation of, and claims a benefit of priorityunder 35 U.S.C. 120 of the filing date of U.S. patent application Ser.No. 12/099,224 by inventors Robert M. Fell, et al., entitled “SYSTEM ANDMETHOD FOR PROVIDING AN INSURANCE PREMIUM FOR PRICE PROTECTION” filed onApr. 8, 2008, now U.S. Pat. No. 7,945,500 which claims a benefit ofpriority to the filing date of U.S. Provisional Patent Application Ser.No. 60/922,528 by inventors Robert M. Fell, Scott Painter, Brian P.Reed, Michael R. Bonsignore and Gary A. Magnuson, entitled “SYSTEM ANDMETHOD FOR PROVIDING AN INSURANCE PREMIUM FOR PRICE PROTECTION” filed onApr. 9, 2007, the entire contents of which are hereby expresslyincorporated by reference for all purposes.

TECHNICAL FIELD

The present invention relates generally to price protection in the fieldof retail commodity purchasing. More particularly, the present inventionrelates to system and methods for providing an insurance premium forprice protection with respect to a commodity price.

BACKGROUND

Almost all commodities that consumers purchase fluctuate in price on aregular basis. The periodicity of these fluctuations depends heavily ona variety of factors, including supply and demand, or variablesassociated with the supply and demand. Certain commodities are morevolatile than others, however. These commodities are usually inrelatively heavy demand or are widely consumed such that any disruptionin the supply of the commodity may cause a commensurate market spike inthe prices of these goods. Products of this type include fuel productssuch as gasoline or diesel, heating oil, natural fuel, crude oil, etc.Disruptions in the supply of these products (or commodities from whichthese products are produced) such as those caused by worlds events,natural disasters, etc. may cause the price of these commodities to jumpmarkedly in a relatively short amount of time. These price spikes arequite noticeable, as these types of products are extensively consumedand fluctuations in the price of these products may occur relativelyrapidly.

The severity of the effects of these price spikes on a given individualor entity is usually tied directly to the amount of the productconsumed. Thus, while individual consumers are certainly affected byspikes in the price of a commodity such as gasoline or diesel, theseeffects may be even more pronounced with regards to large consumers ofthe commodity. For example, with respect to gasoline or diesel,businesses which rely on a fleet of vehicles to conduct their day to dayoperations may be severely financially strained by an increase in theprice of the commodity. Furthermore, these constant fluctuations inprice make anticipating future expenses for the commodity difficult,creating budgeting and accounting issues for these businesses.

Consequently, many individual consumers and businesses desire tofinancially protect themselves from potential increases in the price ofa commodity to not only lower costs for themselves but, additionally, tocreate greater predictability in future costs for that commodity. Thereare currently a variety of schemes that allow consumers to purchasecommodities, one example of these types of schemes is a fuel card, whichis similar to the concept of a gift card. Consumers may purchase a fuelcard such that the fuel card has an associated value. Whenever the fuelcard is used to purchase fuel at a retail point of sale location,however, the retail price at the time of purchase may be used tosubtract value from the fuel card. Thus, the consumer is not protectedfrom adverse fluctuations in the market price of fuel.

Suppose, for example, that a consumer purchases a fuel card with a valueof $100 dollars. The consumer may then make a first purchase of 4gallons of fuel at a time when the retail price of fuel is $2.50, thusfor this purchase a value of $10.00 (4 gallons times the $2.50 cost pergallon) is deducted from the value of the fuel card such that amountremaining on the fuel card which may be used to purchase fuel is $90.00.The consumer then makes a second purchase of 4 gallons of fuel at adifferent time where the retail price of fuel is $3.00. In this case,$12.00 (4 gallons times the $3.00 cost per gallon) is subtracted fromthe value of the fuel card such that the fuel card may still be used topurchase $78.00 (the $12.00 of the current purchase subtracted from the$90.00 of value remaining on the fuel card) of fuel. As can be seenthen, when consumers utilize these schemes they are not protected fromfluctuations in the retail price of a commodity as the purchase of thecommodities at a particular time occurs at the retail price in effect atthat time.

Some purchasing systems have been introduced in certain industrysegments in an effort to address this issue. For example, there arecertain schemes which allow a consumer to purchase a good or service andtake later delivery, in whole or in part, such as purchasing a quantityof fuel which is physically deposited in a storage tank for future atwill consumption. In other words the physical product itself has to beordered and deposited into a storage facility, which has a limitedcapacity.

These types of systems are cumbersome for a variety of reasons: not onlydo they require dedicated storage, but additionally, delivery must betaken at the storage location itself. Moreover, the quantity of thecommodity purchased has been pre-purchased, thus to utilize this methodbeneficially may require a preternatural ability to forecast where themarket price for the product is going (e.g. will it become more or lessexpensive), estimate a consumption pattern for the commodity and, basedupon these forecasts, estimates, current retail price, and myriad otherfactors, determine how much of the commodity is desired. As may beimagined these types of schemes are a rather impractical way forbusinesses to protect themselves against price fluctuations in acommodity and may be almost impossible for a consumer to utilize.

To remedy defects of the purchase and delivery systems discussed above,other schemes have been introduced whereby an individual consumer or abusiness consumer (for example a fleet manager) may purchase a quantityof a commodity (such as fuel) at the then prevailing retail price suchthat an account associated with the consumer is credited with the amountpurchased. At this point, the physical commodity (e.g. fuel) has notactually been delivered but a quantity is held on reserve that can beredeemed in part or in whole at a variety of locations. While this typeof system allows consumers or business to take delivery of the commodityin smaller quantities at a variety of locations it manifests many of thesame problems as the purchase and delivery systems discussed above.

More specifically, while the delivery options have changed (e.g. it isnow possible to take delivery at many locations in many installmentsinstead of storing the purchase commodity) the purchasing of thecommodity remains the same. In other words, in both cases thetransaction for the commodity has been consummated; the consumer hasmade a purchase of a specified quantity of the commodity at a specifiedretail price.

Consequently, the drawbacks of the purchase and delivery systemsdiscussed above apply equally well here. These systems require theability to forecast the market for the commodity, estimate a consumptionpattern for the good, and based upon these forecasts, estimates, thecurrent retail price, and myriad other factors, determine how much ofthe commodity is desired.

From a financial perspective these types of systems have an even greaterdrawback: they only protect a consumer from potential up ticks in theretail price of the commodity. To elucidate, if a consumer purchases acertain quantity of a commodity at a certain retail price and the retailprice for that commodity does indeed go up the consumer has savedhimself the difference between the retail price at which he purchasedand the increased retail price.

Suppose, however, that the consumer is incorrect in predicting thatretail prices for the commodity will increase. In this case, theconsumer is forced to choose between buying the commodity at theprevailing (lower) retail price and using the pre-purchased commodity(paid for at the previous higher retail price). This places the consumerin an undesirable situation. If the consumer's forecast for a neededquantity of a commodity is correct, the desired amount of the commodityhas been pre-purchased and thus, buying the commodity at the prevailingretail price may lead to unused capacity vis-à-vis the commodity. Theconsumer must choose between saving the margin between the lowerprevailing retail price and the pre-purchased price and having unusedcapacity.

Complicating the issue further, the more volatile the price of thecommodity and the larger the volume of the commodity consumed the morecomplicated these types of calculations become. For example, suppose afleet manager pre-purchases a quantity of fuel that he anticipates hisfleet will utilize for a certain time period at a pre-purchase retailprice. Everyday that the prevailing retail price for fuel is below thepre-purchase retail price the fleet manager must determine if it isfinancially beneficial to purchase fuel at the then prevailing retailprice given the amount of fuel the fleet has consumed, the amount offuel the fleet manager anticipates the fleet will consume, thepre-purchase retail price, the prevailing market price and a whole hostof other variables. Many of these variables, however, remain in aconstant state of flux. As may be imagined then, the calculations thatthe fleet manger must make to determine an optimum fuel purchasingstrategy grow increasingly more complicated.

Thus, there is a need for systems and methods for commodity purchasingwhich allow consumers to protect against variability in the price for acommodity by allowing a consumer to protect against adverse fluctuationsin the price of a commodity.

SUMMARY

Systems and methods for providing an insurance premium in associationwith an insurance strike price for a commodity are disclosed. In oneembodiment, by paying the insurance premium a consumer may obtain priceprotection for a commodity purchase. Based on the insurance premium, inone embodiment, an intermediary may provide price protection contractsto consumers.

The functionalities and processes described herein can be implemented atleast in part in suitable computer-executable instructions. Thecomputer-executable instructions may be stored as software codecomponents or modules on one or more computer readable media (forexample, non-volatile memories, volatile memories, DASD arrays, magnetictapes, floppy diskettes, hard drives, optical storage devices, or anyother appropriate computer-readable medium or storage device). In oneexemplary embodiment of the invention, the computer-executableinstructions may include lines of complied C++, Java, HTML, or any otherprogramming or scripting code.

These, and other, aspects of the invention will be better appreciatedand understood when considered in conjunction with the followingdescription and the accompanying drawings. The following description,while indicating various embodiments of the invention and numerousspecific details thereof, is given by way of illustration and not oflimitation. Many substitutions, modifications, additions orrearrangements may be made within the scope of the invention, and theinvention includes all such substitutions, modifications, additions orrearrangements. Other objects and advantages of the present inventionwill become apparent to one skilled in the art upon reading andunderstanding the detailed description of the embodiments describedherein and examples thereof.

BRIEF DESCRIPTION OF THE DRAWINGS

The drawings accompanying and forming part of this specification areincluded to depict certain aspects of the invention. A clearerimpression of the invention, and of the components and operation ofsystems provided with the invention, will become more readily apparentby referring to the exemplary, and therefore nonlimiting, embodimentsillustrated in the drawings, wherein identical reference numeralsdesignate the same components. Note that the features illustrated in thedrawings are not necessarily drawn to scale.

FIG. 1 is a block diagram illustrating one embodiment of a topologywhich may be used to implement embodiments of the present invention.

FIG. 2 is an illustration of one embodiment of the creation and use ofan insurance strike price matrix.

FIG. 3A is a block diagram of one embodiment of an insurance strikeprice matrix.

FIG. 3B is a block diagram of one embodiment of an insurance strikeprice matrix.

FIG. 4 is a graphical representation of one embodiment of an insurancestrike price matrix.

FIG. 5 is a flow diagram of one embodiment of a method for estimatingfinancial risk.

DETAILED DESCRIPTION

The invention and the various features and advantageous details thereofare explained more fully with reference to the nonlimiting embodimentsthat are illustrated in the accompanying drawings and detailed in thefollowing description. Descriptions of well known starting materials,processing techniques, components and equipment are omitted so as not tounnecessarily obscure the invention in detail. Skilled artisans shouldunderstand, however, that the detailed description and the specificexamples, while disclosing preferred embodiments of the invention, aregiven by way of illustration only and not by way of limitation. Varioussubstitutions, modifications, additions or rearrangements within thescope of the underlying inventive concept(s) will become apparent tothose skilled in the art after reading this disclosure.

As used herein, the terms “comprises,”“comprising,” “includes,”“including,” “has,”“having” or any other variation thereof, are intendedto cover a non-exclusive inclusion. For example, a process, article, orapparatus that comprises a list of elements is not necessarily limitedonly those elements but may include other elements not expressly listedor inherent to such process, process, article, or apparatus. Further,unless expressly stated to the contrary, “or”refers to an inclusive orand not to an exclusive or. For example, a condition A or B is satisfiedby any one of the following: A is true (or present) and B is false (ornot present), A is false (or not present) and B is true (or present),and both A and B are true (or present).

Additionally, any examples or illustrations given herein are not to beregarded in any way as restrictions on, limits to, or expressdefinitions of, any term or terms with which they are utilized. Insteadthese examples or illustrations are to be regarded as being describedwith respect to one particular embodiment and as illustrative only.Those of ordinary skill in the art will appreciate that any term orterms with which these examples or illustrations are utilized willencompass other embodiments which may or may not be given therewith orelsewhere in the specification and all such embodiments are intended tobe included within the scope of that term or terms. Language designatingsuch nonlimiting examples and illustrations includes, but is not limitedto: “for example,”“for instance,” “e.g.,” “in one embodiment,” etc.

Reference is now made in detail to the exemplary embodiments of theinvention, examples of which are illustrated in the accompanyingdrawings. Wherever possible, the same reference numbers will be usedthroughout the drawings to refer to the same or like parts (elements).

Within this disclosure, the term “commodity” refers to an article ofcommerce—an item that can be bought and sold freely on a market. It maybe a product which trades on a commodity exchange or spot market andwhich may fall into one of several categories, including energy, food,grains, and metals. Currently, commodities that can be traded on acommodity exchange include, but are not limited to, crude oil, lightcrude oil, natural gas, heating oil, gasoline, propane, ethanol,electricity, uranium, lean hogs, pork bellies, live cattle, feedercattle, wheat, corn, soybeans, oats, rice, cocoa, coffee, cotton, sugar,gold, silver, platinum, copper, lead, zinc, tin, aluminum, titanium,nickel, steel, rubber, wool, polypropylene, and so on. Note that acommodity can refer to tangible things as well as more ephemeralproducts. Foreign currencies and financial indexes are examples of thelatter. For example, positions in the Goldman Sachs Commodity Index(GSCI) and the Reuters Jefferies Consumer Research Board Index (RJCRBIndex) can be traded as a commodity. What matters is that something beexchanged for the thing. New York Mercantile Exchange (NYMEX) andChicago Mercantile Exchange (CME) are examples of a commodity exchange.Other commodities exchanges also exist and are known to those skilled inthe art.

In a simplified sense, commodities are goods or products with relativehomogeneousness that have value and that are produced in largequantities by many different producers; the goods or products from eachdifferent producer are considered equivalent. Commoditization occurs asa goods or products market loses differentiation across its supply base.As such, items that used to carry premium margins for marketparticipants have become commodities, of which crude oil is an example.However, a commodity generally has a definable quality or meets astandard so that all parties trading in the market will know what isbeing traded. In the case of crude oil, each of the hundreds of gradesof fuel oil may be defined. For example, West Texas Intermediate (WTI),North Sea Brent Crude, etc. refer to grades of crude oil that meetselected standards such as sulfur content, specific gravity, etc., sothat all parties involved in trading crude oil know the qualities of thecrude oil being traded. Motor fuels such as gasoline represent examplesof energy-related commodities that may meet standardized definitions.Thus, gasoline with an octane grade of 87 may be a commodity andgasoline with an octane grade of 93 may also be a commodity, and theymay demand different prices because the two are not identical —eventhough they may be related. Those skilled in the art will appreciatethat other commodities may have other ways to define a quality. Otherenergy-related commodities that may have a definable quality or thatmeet a standard include, but are not limited to, diesel fuel, heatingoils, aviation fuel, and emission credits. Diesel fuels may generally beclassified according to seven grades based in part on sulfur content,emission credits may be classified based on sulfur or carbon content,etc.

Historically, risk is the reason exchange trading of commodities began.For example, because a farmer does not know what the selling price willbe for his crop, he risks the margin between the cost of producing thecrop and the price he achieves. In some cases, investors can buy or sellcommodities in bulk through futures contracts. The price of a commodityis subject to supply and demand.

A commodity may refer to a retail commodity that can be purchased by aconsuming public and not necessarily the wholesale market only. Oneskilled in the art will recognize that embodiments disclosed herein mayprovide means and mechanisms through which commodities that currentlycan only be traded on the wholesale level may be made available toretail level for retail consumption by the public. One way to achievethis is to bring technologies that were once the private reserves of themajor trading houses and global energy firms down to the consumer leveland provide tools that are applicable and useful to the retail consumerso they can mitigate and/or manage their measurable risks involved inbuying/selling their commodities. One example of an energy relatedretail commodity is motor fuels, which may include various grades ofgasoline. For example, motor fuels may include 87 octane grade gasoline,93 octane grade gasoline, etc as well as various grades of diesel fuels.Other examples of an energy related retail commodity could be jet fuel,heating oils, electricity or emission credits such as carbon offsets.Other retail commodities are possible and/or anticipated.

While a retail commodity and a wholesale commodity may refer to the sameunderlying good, they are associated with risks that can be measured andhandled differently. One reason is that, while wholesale commoditiesgenerally involve sales of large quantities, retail commodities mayinvolve much smaller transaction volumes and relate much more closely tohow and where a good is consumed. The risks associated with a retailcommodity therefore may be affected by local supply and demand andperhaps different factors. Within the context of this disclosure, thereis a definable relationship between a retail commodity and the exposureof risks to the consumer. This retail level of the exposure of risks maycorrelate to the size and the specificity of the transaction in whichthe retail commodity is traded. Other factors may include thegranularity of the geographic market where the transaction takes place,and so on. For example, the demand for heating oil No. 2 in January maybe significantly different in the Boston market than in the Miamimarket.

No matter, what the commodity, however, in many instances individualconsumers (which includes businesses) desire to financially protectthemselves from potential increases in the price of a commodity to notonly lower costs for themselves but, additionally, to create greaterpredictability in future costs for that commodity. For example, as theprice of oil continues to fluctuate globally and fluidly, fuel prices atthe pump can change from location to location on a daily or even hourlybasis. In such a volatile market, a consumer or business may desire toprotect themselves against adverse fluctuations.

Embodiments of the invention disclosed herein provide just such a methodfor a consumer (which may be a business, individual, etc.) to protectthemselves against these adverse fluctuations. More specifically,embodiments of the invention disclose systems and methods for providingan insurance premium in association with an insurance strike price for acommodity such that by paying the insurance premium a consumer mayobtain price protection for a commodity purchase. In particular, aconsumer may obtain the right to be reimbursed for any amount paid overthe insurance strike price for the commodity. While embodiments of thepresent invention will be illustrated using fuel as an example commodityit will be understood that embodiments of the present invention mayapply equally well to almost any other commodity.

Based on the insurance premium, an intermediary may provide priceprotection contracts to consumers, where the provisioning of these priceprotection contracts may present a number of revenue generationopportunities. Examples of such provisioning can be found in applicationSer. No. 11/705,571 by inventors Robert M. Fell, Scott Painter, MichaelR. Bonsignore, Brian P. Reed, and Gary A. Magnuson, titled: “METHOD ANDSYSTEM FOR PROVIDING PRICE PROTECTION FOR COMMODITY PURCHASING THROUGHPRICE PROTECTION CONTRACTS,” and filed on Feb. 12, 2007 while examplesof revenue models for generating revenue from the provisioning of theseprice protection contracts can be found in application Ser. No.12/030,073 by inventors Robert M. Fell, Scott Painter, Michael R.Bonsignore, Brian P. Reed, Gary A. Magnuson, and Thomas D. Gros entitled“SYSTEM AND METHOD FOR GENERATING REVENUES IN A RETAIL COMMODITYNETWORK” and filed on Feb. 12, 2008 all of which are fully incorporatedherein by reference.

Embodiments of the systems and methods of the present invention may bebetter explained with reference to FIG. 1 which depicts one embodimentof a topology which may be used in conjunction with the systems andmethods of the present invention. Topology 100 comprises priceprotection system 120 which is coupled through network 170 to computingdevices 110 (e.g. computer systems, personal data assistants, kiosks,dedicated terminals, etc), insurance provider 140, and one or moreassociated retail point of sale locations 160.

Insurance provider 140 may provide an insurance strike price and anassociated insurance premium (for example a hedge cost per gallon orHCPG), such that by paying the insurance premium to the insuranceprovider the payer will be indemnified for any cost of fuel above theinsurance strike price. Price protection system 120 may utilize theinsurance strike price and associated insurance premium to provisionprice protection contracts to various consumers.

More particularly, fleet managers (or any other consumer) desiring toobtain protection from future increases in the retail price of fuel, orto increase predictability of future fuel costs, may access priceprotection system 120 to obtain price protection contracts pertaining tofuel. More specifically, in one embodiment, a fleet manager may accessprice protection system 120 on computing device 110 using a set ofinterfaces provided by price protection system 120 in order to provide aset of inputs regarding desired price protection to price protectionsystem 120. Using these inputs, price protection system 120 may utilizean insurance strike price and an associated insurance premium providedby insurance provider 140 to determine a price protection contract.

Using the insurance strike price obtained from insurance provider 140then, price protection system 120 may present the fleet manager with aprice protection contract specifying at least one lock price, quantity,locale, fuel grade or time period, which the fleet manager can obtain ifhe desires. By obtaining this price protection contract the fleetmanager guarantees the right to purchase the quantity of the specifiedgrade of fuel at the lock price at a number of retail point of salelocations 160.

If a fleet manager purchases fuel where the retail price of the fuel isabove the lock price, the operators of price protection system 120 maypay the retail point of sale location for the purchased quantity at theprevailing retail price, or some lesser or greater amount. For thequantity of fuel purchased then, the operators of price protectionsystem 120 may recoup the difference between an insurance strike priceand the prevailing retail price at the retail point of sale location atthe time of purchase from insurance provider 140. Though insuranceprovider 140 may be a distinct entity from the operator of priceprotection system 120 such as a insurance provider or another entity ororganization capable of providing an insurance premium associated withone or more insurance strike prices it will be realized that theoperators of price protection system 120 may also perform thedetermination of the insurance strike price and an associated insurancepremium (e.g. operators of price protection system 120 and insuranceprovider 140 may be one and the same or different according to variousembodiments of the present invention).

Attention is now directed to an exemplary process flow for oneembodiment of providing an insurance premium in conjunction with one ormore insurance strike prices. Utilizing these insurance premiums andassociated insurance strike prices an intermediary such as the operatorsof a price protection system 120 may provide price protection contractsto consumers (e.g. fleets or individual consumers) is depicted.

Turning to FIG. 2, one embodiment of the provisioning of an insurancepremium in association with an insurance strike is depicted. Insuranceprovider 140 may determine one or more insurance strike prices 220 andan associated insurance premium 220 to associate with the one or moreinsurance strike prices. In one embodiment, these insurance strikeprices may be determined on a locale by locale basis where a locale maybe any way of defining a geographic area of interest (including but notlimited to countries, states, cities, metropolitan areas, zip codes,counties, area codes, designated market area (DMA), which may be anyarea where a consumer may receive similar offerings or prices, etc.

Thus, in one embodiment, for a particular locale, such as a DMA,insurance provider 140 may determine an insurance strike price (step210) and associated insurance premium (step 220) for a particular fuelgrade and time period. Insurance provider 140 may determine theinsurance premium associated with a particular insurance strike price,fuel grade and time period, via one or more heuristic methodologies,including a Black-Scholes marketing formula. These heuristicmethodologies may price the risk associated with providingindemnification associated with a particular insurance strike price and(e.g. in a particular locale, for a particular fuel grade for aparticular time period) take into account such factors as demand forretail price protection, current retail price of fuel in that locale,analysis of forward markets, ability to hedge positions in a market,forward gas price calculations, the cost of wholesale futures for fuel,the wholesale price of fuel or almost any other factor or variablegermane to the determination of insurance strike prices and insurancepremiums (for example market data such as options/forward contracts onNY Harbor Wholesale Price of Gasoline from the New York MercantileExchange (NYMEX, also known as NY Merc or MERC). For example, insuranceprovider 140 may employ a model or simulation which may determine one ormore wholesale strike prices and associated insurance premiums for a DMAbased on the wholesale cost of fuel and add an estimated markupassociated with that DMA to determine an insurance strike price for thatDMA which may then be associated with the same insurance premium.

Insurance provider 140 may therefore, in one embodiment, determine aninsurance premium for a particular locale, fuel grade, insurance strikeprice and time period. Sets of these locales, time periods, fuel grades,insurance strike prices and associated insurance premium may be groupedtogether to form an insurance provider strike price matrix.

FIG. 3A and 3B depict representations of embodiments of a portion of aninsurance provider strike price matrix. Here, in FIG. 3A an insuranceprovider strike price matrix 300 comprises a set of price decks 320where a price deck 320 comprises a set of individual DMAs. Each of theindividual DMAs of a price deck 320 is, in turn, associated with a timeperiod, a fuel grade a per gallon insurance provider strike price and aHCPG 310, whereby if a party pays the insurance provider 140 the HCPG310 they may be indemnified for any price above the correspondinginsurance strike price in a corresponding price deck 320 provided thatthe fuel is of the associated grade and is purchased in the localeassociated with the insurance provider strike price within theassociated time period.

For example, with respect to price deck 320 a, if a party pays a HCPG of$0.35, for a certain quantity of fuel, they may obtain the right to beindemnified by insurance provider 140 for any amount over $3.00 spent ona gallon of diesel fuel purchased in the Austin DMA in the next 6 monthsup to the quantity of fuel for which the HCPG was paid. It will beappreciated that the above embodiment is exemplary only, and that a widevariety of other configurations and formats for insurance providerstrike price matrices may be utilized without loss of generality.

For example, in FIG. 3B an insurance provider strike price matrix 350 isassociated with a grade or type of fuel and an index price 352 for thatgrade or type (index prices are discussed in more detail in U.S.application Ser. No. 12/099,253, by inventors Robert M. Fell, ScottPainter, Brian P. Reed, Michael R. Bonsignore, Gary A. Magnuson andThomas Gros, entitled “SYSTEM AND METHOD FOR INDEX BASED SETTLEMENTUNDER PRICE PROTECTION CONTRACTS”, and filed on Apr. 8, 2008, fullyincorporated herein by reference). Insurance provider strike pricematrix 350 also comprises set of individual DMAs 360 (or othergeographical delineators as discussed above). Each of the individualDMAs 360 of the insurance provider strike price matrix 350 is, in turn,associated with a set of option types 370, each option type having anassociated insurance strike price (which may be defined relative to theindex price 352, such as the index price +0.30, etc.) and one or moresubsets of other parameters, such as exercise options, constraints, etc.Therefore, in insurance provider strike price matrix 350 an insurancepremium may be associated with a particular DMA, an insurance strikeprice and a certain option with a subset of parameters such that bypaying that insurance premium they may be indemnified for any priceabove the insurance strike price according to the particular option andthe set of parameters corresponding to the particular option selectedprovided that the fuel is of the associated grade or type and ispurchased in the DMA.

A graphical representation of an embodiment of a portion of an insuranceprovider strike price matrix is depicted in FIG. 4. Here insuranceprovider strike price matrix 400 is based on an insurance strike priceof $2.51 (which may be, in turn based on a national index average forfuel costs), where the Y axis represents the price of the option and Xaxis represents the protection offered. For example, point 410 indicatesthat by paying 30 cents a gallon one can obtain protection for aninsurance strike price of $2.51 (here referred to as the spot price) fora 3 month period with no constraints governing the usage of thisprotection during the 3 months. Point 420 indicates that by paying about0.35 cents per gallon one can obtain protection for an insurance strikeprice of $2.71(0.20 cents above spot price) for a 12 month period with a20% constraint on usage (e.g. no more than 20% of the total protectionobtained may be exercised in a month, in other words if protection isobtained for 100 gallons of fuel no more than 20 gallons may bepurchased under using this price protection each month).

Therefore, a party may utilize these insurance premiums to obtain priceprotection on the purchase of fuel from insurance provider 140. Basedupon the ability to obtain price protection from insurance provider 140a product (e.g. a contract) for price protection may be provided to aconsumer by an intermediary utilizing the price protection offered byinsurance provider.

This may be explained in more detail with reference back to FIG. 2,where price protection system 120 may receive the insurance providerstrike price matrix (step 230). Based on the insurance strike pricematrix, price protection system 120 may determine a product for aconsumer such as a price protection contract (step 240). This priceprotection contracts may comprise a fuel grade, time period and a set oflocales, where each of the locales (or groups of locales) may have alock price or quantity associated with it. By obtaining a particularprice protection contract the consumer may obtain the right for the timeperiod specified to aggregately purchase the specified quantity of thegrade of fuel in each of the locales at the lock price associated withthe locales if the retail price of that grade of fuel goes above theassociated lock price in the locale.

The terms of the price protection contract offered to the consumer fromprice protection system 120 may be different or the same as the terms ofprice protection offered to operators of price protection system frominsurance provider 140 (e.g. in the provided insurance strike pricematrix) or price protection obtained by operators of price protectionsystem 120 from insurance provider based upon a consumer's obtaining aparticular price protection contract. For example, the lock price may begreater or less than an insurance strike price, the time period offeredin the contract may be longer or shorter than the time period providedfor in the insurance strike price matrix, the fuel grade may bedifferent, etc. It will be noted then that the price protection contractoffered to a user may be based on a variety of factors including theprice protection offered by insurance provider, the risk aversion (e.g.the decision to take on or not take on any risk) of operators of priceprotection system 120, revenue desired by operators of price protectionsystem 120 and the methodologies employed to generate this revenue, etc.

The determination of such a consumer price protection contract may bebetter understood with reference to FIG. 5 which depicts a flow diagramof one embodiment of a method for determining or the financial risk inthe provisioning of price protection. The determined financial risk maythen be used in the provisioning of the consumer price protectioncontract, for example by providing a consumer price protection contractwhereby the providers of the consumer contracts take on or lay off moreor less risk.

In step 505, price protection system 120 may receive an insuranceprovider strike price matrix from insurer 140 as discussed above. Priceprotection system 120 (including its operators) may then performanalyses and determine a financial risk associated with offering aconsumer the ability to obtain a price protection contract where theterms of the price protection contract may be changed from thoseprovided to operators of price protection system by insurance provider140 in the insurance provider strike price matrix.

The analysis may include historical analyses (at step 510), such as howan index price has fluctuated in recent months, what events affect theprice of the commodity, how commodity prices have changed in response tolocal, regional and global events, how closely commodity prices inoutlying areas have followed commodity prices in metropolitan areas, andthe like. For example, weather can affect the price of heating oil. So,in some embodiments, a provider of a carbon-based energy product such asheating fuel may perform a historical analysis on the weather in Januaryin the northeast part of the United States to determine the financialrisk associated with providing a price protection contract for heatingoil to consumers in Boston. The historical analysis of weather in thenortheast may influence the provider to expect heating oil prices wouldbe lower than that expected by insurance provider 140. In someembodiments, a provider of price protection contracts may offer aproduct for areas other than the DMAs specified in the insuranceprovider strike price matrix.

In these embodiments, for example, a historical analysis related to howclosely prices in outlying areas have followed commodity prices inmetropolitan areas may be performed. Thus, price protection system orits operators may determine that a higher or lower financial risk thanthe risk reflected in the insurance provider strike price matrix isbeing born in providing a certain consumer price protection contract.

At step 520, data may be analyzed to determine an expectation for theprice of a commodity based on any of the terms of the insurance providerstrike price matrix. For example, provider 120 may analyze marketconditions for a given DMA based on the type of commodity, the quantity,and a time period. In other embodiments, provider 120 may analyze marketconditions on terms other than what are in the insurance provider strikeprice matrix. For example, provider 120 may analyze market conditions atthe zip code level and the insurance provider strike price matrix may bebased on market conditions studied at the state level. Provider 120 mayanalyze market conditions weekly and insurer 140 may analyze marketconditions monthly. Provider 120 may analyze market conditions based onsettling the price against an aggregate price computed from transactionsthat occurred within a geographic boundary, and insurer 140 may analyzemarket conditions to determine an index price for settling.

The analysis may include both historical analysis and scenario analysis.Provider may analyze information received from consumers accessing priceprotection system 120 via computing devices to estimate a marketcondition that could affect the price of the commodity. Thus, provider120 may determine a financial risk for a consumer price protectioncontracts based on broader or narrower terms than what is found in theinsurance provider strike price matrix.

At step 530, provider 120 may analyze information relating to consumers110. The information may be provided by consumers 110 accessing priceprotection system 120 via computing devices. The information may includepast transactions, the quantity of the commodity consumed in otherperiods, the average price paid by consumer 110 in relation to otherconsumers 110 during the same time period, etc.

Other factors may also be taken into account in analyzing risk in thedetermination of a price protection contract. At step 540, provider 120may analyze information relating to retail locations 160. Theinformation may be provided by retail locations 160. The information mayinclude the quantity of the commodity sold at location 160 in relationto other locations 160, the average price at which location 160 sold thecommodity as compared to other locations 160, the storage capacity oflocation 160, etc. At step 550, price protection system 120 may performscenario analyses of possible stress events. As an example, the price ofretail gasoline may continue to rise. A scenario analysis of variousstress events may be more reliable than historical analysis of someevents. At step 560, price protection system 120 may further analyzeother factors, such as the forward markets for the commodity, thecurrent average retail price of the commodity; the ability of operatorsof price protection system 120 to generate revenue from any of a varietyof sources, impending regulatory legislation, etc. For example, datareceived from sales of price protection contract at retail locations 160may be analyzed to determine a financial risk. At step 570, priceprotection system 120 may compare the different analyses, weight them,or otherwise determine a financial risk for the commodity based on ananalysis or analyses of data.

It may be helpful to an understanding of embodiments disclosed herein toillustrate specific examples of the altering (i.e., changing or addingterms) of terms in the provisioning of a price protection contract toaccept more or less risk based on the indemnification options offered tothe providers of price protection products. In one embodiment, the termspertaining to price or time period may be altered to accept risk. Forexample, suppose insurance strike price matrix states offers protectionagainst an insurance strike price of $2.50 per gallon in the Austin DMAfor 6 months for a HCPG of 25 cents. In this case, a price protectioncontract may be presented to a consumer offering price protection in theAustin DMA for 6 months at a lock price of $2.45 per gallon for thepurchase price of $2.75 per gallon. If the consumer obtains this priceprotection contract for a specified amount of fuel the operators ofprice protection system 120 may obtain indemnification for the sameamount of fuel from insurance provider 140 according to the insurancestrike price of $2.50 per gallon in the Austin DMA for 6 months for aHCPG of 25 cents. Here the operators of price protection system 120 haveaccepted 0.05 cents of risk on the amount of fuel on which priceprotection was obtained by the consumer. Similarly, price protectionsystem 120 may offer a price protection contract to a consumer offeringprice protection in the Austin DMA for 7 months at a lock price of $2.50per gallon for the purchase price of $2.75 per gallon. If the consumerobtains this price protection contract for a specified amount of fuelthe operators of price protection system 120 may obtain indemnificationfor the same amount of fuel from insurance provider 140 according to theinsurance strike price of $2.50 per gallon in the Austin DMA for 6months for a HCPG of 25 cents. Here, the operators of price protectionsystem 120 have accepted the risk that the price will be above the $2.50per gallon lock price for the additional month of the price protectioncontract relative to the indemnification obtained from insuranceprovider 140.

In some embodiments, providers of price protection may change the mannerin which the settlement of a provided price protection contract isperformed. To illustrate, suppose insurance strike price matrix statesoffers protection against an insurance strike price of $2.50 per gallonin the Austin DMA for 6 months for a HCPG of 25 cents, where theindemnification from the insurance provider 140 to operators of priceprotection system 120 is to be determined according to an index price(e.g. the difference between the index price and the insurance strikeprice). In this case, price protection system 120 may offer a priceprotection contract to consumer 110 offering price protection in theAustin DMA for 6 months at a lock price of $2.50 per gallon for thepurchase price of $2.75 per gallon. Any transactions under this priceprotection contract may be settled against the retail price at theretail point of location where the transaction occurs. If a consumerobtains this price protection contract for a selected amount of fuel theoperators of price protection system 120 may obtain indemnification forthe same amount of fuel from insurance provider 140 according to theinsurance strike price of $2.50 per gallon in the Austin DMA for 6months for a HCPG of 25 cents where the indemnification is determinedwith respect to the index price. Here the providers of price protection120 have assumed the risk of any difference between the retail price atthe retail point of sale location where fuel is purchased and the indexprice at the time of the transaction.

In some embodiments, providers of price protection may add terms to aprice protection contract which place constraints on a consumer'sexercise of their rights under the product. To illustrate, supposeinsurance strike price matrix states offers protection against aninsurance strike price of $2.50 per gallon in the Austin DMA for 6months for a HCPG of 25 cents. In this case, a price protection contractmay be presented to a consumer offering price protection in the AustinDMA for 6 months at a lock price of $2.50 per gallon for the purchaseprice of $2.75 per gallon where the consumer may only deplete 20% of theamount of fuel purchased under the price protection contract in a givenmonth. If the consumer obtains this price protection contract for acertain amount of fuel the operators of price protection system 120 mayobtain indemnification for the same amount of fuel from insuranceprovider 140 according to the insurance strike price of $2.50 per gallonin the Austin DMA for 6 months for a HCPG of 25 cents where theindemnification is determined with respect to the index price. Here theproviders of price protection contract 120 accepted less risk by placingthese constraints on the exercise of the price protection contract bythe consumer. If the consumer exceeds the depletion constraint theconsumer may be responsible for the purchase of any amount of fuelexceeding this constraint at the then prevailing retail price at thepoint of sale location. For example, suppose that a consumer purchases120 gallons of fuel under the example price protection contractdiscussed above with a 30% per month depletion constraint. Suppose nowthat in the first month after obtaining the price protection contractthe consumer purchases 44 gallons of fuel above the lock price of theprice protection contract. In this example, the operators of priceprotection system 120 may pay the retail point of sale location wherethe fuel was purchased for 36 gallons under the price protectioncontract and the 44 gallons may be depleted from the consumer' virtualreserve. The consumer, however, may be responsible for paying the thenprevailing retail price at the retail point of sale location for the 8gallons that exceeded the terms of the price protection contract. Thisamount, for example, may be billed through to a credit card associatedwith the consumer's account.

It will be noted that the above descriptions and examples are forillustrative purposes only and that terms may be changed, added, orotherwise altered to take on or lay off risk in almost any mannerimaginable, and that almost any alteration of terms in the provisioningof a price protection contract for the purchase of a commodity will beencompassed by the scope of embodiments of the invention disclosedherein.

In the foregoing specification, the invention has been described withreference to specific embodiments. However, one of ordinary skill in theart will appreciate that various modifications and changes can be madewithout departing from the spirit and scope of the invention disclosedherein. Accordingly, the specification and figures disclosed herein areto be regarded in an illustrative rather than a restrictive sense, andall such modifications are intended to be included within the scope ofthe invention.

Benefits, other advantages, and solutions to problems have beendescribed above with regard to specific embodiments. However, thebenefits, advantages, solutions to problems, and any component(s) thatmay cause any benefit, advantage, or solution to occur or become morepronounced are not to be construed as a critical, required, or essentialfeature or component of any or all the claims.

1. A method for providing insurance for commodity purchasing,comprising: creating, at an insurance system comprising one or morecomputing devices having a processor, an insurance strike price matrixcorresponding to a commodity, wherein the insurance strike price matrixcomprises a set of insurance strike prices, wherein each insurancestrike price is associated with an insurance premium and a locale;providing the insurance strike price matrix over a network to a priceprotection system comprising one or more computing devices having aprocessor and coupled to the insurance system via the network, whereinthe price protection system is configured to: analyze, one or morefactors to determine a financial risk associated with at least oneinsurance strike price and associated insurance premium, offer a priceprotection product to a consumer via the network, wherein the priceprotection product is for the commodity and specifies a lock price andan associated locale and obtain a payment associated with the priceprotection product from the consumer; and indemnifying an operator ofthe price protection system for a purchase of the commodity made by theconsumer, wherein the indemnification for each purchase is made based onthe locale associated with the purchase and the insurance strike priceassociated with the locale.
 2. The method of claim 1, wherein the one ormore factors include information relating to the consumer andinformation relating to retail locations within the locale.
 3. A methodfor providing price protection for commodity purchasing, comprising:receiving via a network, from an insurance system comprising one or morecomputing devices having a processor, by a price protection systemcomprising one or more computing devices having a processor, aninsurance strike price matrix corresponding to a commodity, wherein theinsurance strike price matrix comprises a set of insurance strikeprices, wherein each insurance strike price is associated with aninsurance premium and a locale; analyzing, by the price protectionsystem, one or more factors to determine a financial risk associatedwith at least one insurance strike price and associated insurancepremium; offering, by the price protection system, a price protectionproduct to a consumer via the network, wherein the price protectionproduct is for the commodity and specifies a lock price and anassociated locale and obtain a payment associated with the priceprotection product from the consumer; obtaining a payment associatedwith the price protection product from the consumer, wherein an operatorof the price protection system is indemnified by the insurance systemfor a purchase of the commodity made by the consumer, wherein theindemnification for each purchase is made based on the locale associatedwith the purchase and the insurance strike price associated with thelocale.
 4. The method of claim 3, further comprising: providing, via thenetwork, a set of interfaces to the consumer; and receiving, from theconsumer, a set of inputs regarding desired price protection; anddetermining a price protection product for the consumer utilizing thereceived set of inputs.
 5. The method of claim 4, wherein providing theset of interfaces to the consumer includes presenting the consumer witha price protection product specifying at least one lock price, quantity,locale, fuel grade or time period.
 6. The method of claim 4, whereinproviding the set of interfaces to the consumer includes presenting aplurality of locales.
 7. The method of claim 3, wherein the one or morefactors include information relating to the consumer and informationrelating to retail locations within the locale.
 8. A non-transitorycomputer readable medium carrying program instructions executable by aprocessor to: create an insurance strike price matrix corresponding to acommodity, wherein the insurance strike price matrix comprises a set ofinsurance strike prices, wherein each insurance strike price isassociated with an insurance premium and a locale; provide the insurancestrike price matrix via a network to a price protection systemcomprising one or more computing devices having a processor and anon-transitory computer readable medium coupled to the network, whereinthe price protection system is configured to: analyze one or morefactors to determine a financial risk associated with at least oneinsurance strike price and associated insurance premium, offer a priceprotection product to a consumer via the network, wherein the priceprotection product is for the commodity and specifies a lock price andan associated locale, and obtain a payment associated with the priceprotection product from the consumer; and indemnify an operator of theprice protection system for a purchase of the commodity made by theconsumer, wherein the indemnification for each purchase is made based onthe locale associated with the purchase and the insurance strike priceassociated with the locale.
 9. The non-transitory computer readablemedium of claim 8, wherein the one or more factors include informationrelating to the consumer and information relating to retail locationswithin the locale.
 10. A non-transitory computer readable mediumcarrying program instructions executable by a processor to: receive froman insurance system comprising one or more computing devices having aprocessor via a network, an insurance strike price matrix correspondingto a commodity, wherein the insurance strike price matrix comprises aset of insurance strike prices, wherein each insurance strike price isassociated with an insurance premium and a locale; analyze one or morefactors to determine a financial risk associated with at least oneinsurance strike price and associated insurance premium; offer a priceprotection product to a consumer via the network, wherein the priceprotection product is for the commodity and specifies a lock price andan associated locale; obtain a payment associated with the priceprotection product from the consumer, wherein an operator of a priceprotection system is indemnified by the insurance system for purchasesof the commodity made by the consumer, wherein the indemnification foreach purchase is made based on the locale associated with the purchaseand the insurance strike price associated with the locale.
 11. Thenon-transitory computer readable medium of claim 10, wherein the programinstructions are executable by the processor to: provide, via thenetwork, a set of interfaces to the consumer; and receive, from theconsumer, a set of inputs regarding desired price protection; anddetermine a price protection product for the consumer, utilizing thereceived set of inputs.
 12. The non-transitory computer readable mediumof claim 10, wherein providing the set of interfaces to the consumerincludes presenting the consumer with a price protection productspecifying at least one insurance strike price, quantity, locale, fuelgrade or time period.
 13. The non-transitory computer readable medium ofclaim 12, wherein providing the set of interfaces to the consumerincludes presenting a plurality of locales.
 14. The non-transitorycomputer readable medium of claim 10, wherein the one or more factorsinclude information relating to the consumer and information relating toretail locations within the locale.
 15. An insurance system, comprising:one or more computing devices each having a processor and coupled to anetwork; and a non-transitory computer-readable media storing a set ofcomputer instructions executable by the processor to perform: creatingan insurance strike price matrix corresponding to a commodity, whereinthe insurance strike price matrix comprises a set of insurance strikeprices, wherein each insurance strike price is associated with aninsurance premium and a locale; providing the insurance strike pricematrix over the network to a price protection system comprising one ormore computing devices having a processor and coupled to the insurancesystem via the network, wherein the price protection system isconfigured to: analyze one or more factors to determine a financial riskassociated with at least one insurance strike price and associatedinsurance premium, offer a price protection product to a consumer viathe network, wherein the price protection product is for theindemnifying an operator of the price protection system for a purchaseof the commodity made by the consumer, wherein the indemnification foreach purchase is made based on the locale associated with the purchaseand the insurance strike price associated with the locale.
 16. Theinsurance system of claim 15, wherein the one or more factors includeinformation relating to the consumer and information relating to retaillocations within the locale.
 17. A price protection system, comprising:one or more computing devices each having a processor and coupled to anetwork; and a non-transitory computer-readable media storing a set ofcomputer instructions executable by the processor to perform: receivingan insurance strike price matrix over the network from an insurancesystem comprising one or more computing devices having a processor andcoupled to the price protection system via the network, wherein theinsurance strike price matrix comprises a set of insurance strikeprices, wherein each insurance strike price is associated with aninsurance premium and a locale; analyzing one or more factors todetermine a financial risk associated with at least one insurance strikeprice and associated insurance premium; offering a price protectionproduct to a consumer via the network, wherein the price protectionproduct is for the commodity and specifies a lock price and anassociated locale; and obtaining a payment associated with the priceprotection product from the consumer, wherein an operator of the priceprotection system is indemnified by the insurance system for purchasesof the commodity made by the consumer, wherein the indemnification foreach purchase is made based on the locale associated with the purchaseand the insurance strike price associated with the locale.
 18. The priceprotection system of claim 17, wherein the one or more factors includeinformation relating to the consumer and information relating to retaillocations within the locale.